New article: Executive Compensation Arrangements for Tax-Exempt Organizations
(Posted on December 6, 2023 by Carol V. Calhoun)

Tax-exempt organizations face special legal challenges in developing compensation packages for their executives. A new article, Executive Compensation Arrangements for Tax-Exempt Organizations, published in the Lexis Practice Advisor provides practical guidance on developing benefits for executives of nonprofits.

This article is divided into the following main topics:

Executive compensation considerations for tax-exempt entities
Excise Tax on Excess Executive Compensation
Deferred compensation rules
Severance pay
Vacation and sick leave plans
Performance bonuses and other nonfixed payments
Fringe benefits

New Article: Substantial Risk of Forfeiture Under the IRC
(Posted on December 4, 2023 by Carol V. Calhoun)

An article recently published in the Lexis Practice Advisor, Substantial Risk of Forfeiture Under the IRC, discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, and 3121(v)(2) of the Internal Revenue Code and the different consequences of the failure to achieve a SRF under each such section.

Topics covered are:

Significance of SRF under the Various I.R.C. Sections
Definition of SRF
Conditions that Generally Support the Existence of a SRF and Related Requirements
Conditions that Generally Do Not Support the Existence of a SRF
Other rules relating to SRF

It is accompanied by a Substantial Risk of Forfeiture Comparison Chart, which summarizes the rules.

New Article: Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A)
(Posted on December 4, 2023 by Carol V. Calhoun)

A new article, Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A), discusses the rules that apply to deferred compensation plans maintained by certain corporations located in tax haven jurisdictions and partnerships owned by such corporations and/or by tax-exempt organizations. Topics covered include:

Purpose of Section 457A
Application of Section 457A
Substantial Risk of Forfeiture
Nonqualified Entities
Service Providers
Nonqualified Deferred Compensation Plans
Tax Effect of Section 457A
Relationship between Section 457A and FICA Taxes
Relationship between Sections 457A and 409A
Effective Date and Transitional Rule

New PowerPoint: Avoiding Fringe Benefit Pitfalls: Tax Traps, De Minimis Rules, Correction Procedures, Fiduciary Risks
(Posted on April 4, 2019 by Carol V. Calhoun)

A recent CLE webinar guided benefits counsel and advisers on recent rules and regulations in providing fringe benefits to employees and avoiding dangerous and costly issues that arise regarding such benefits including personal liability under ERISA. The panel discussed key considerations in structuring fringe benefits, tax traps, de minimis rules, effective correction procedures and methods to minimize fiduciary risks. The PowerPoint presentation for the portion of the webinar dealing with tax aspects is now available at this link.

“Effect of the Tax Cuts and Jobs Act of 2017 on Nonprofits and Governments,” PowerPoint now available
(Posted on February 15, 2018 by Carol V. Calhoun)

The Tax Cuts and Jobs Act of 2017 made a number of changes affecting the compensation and benefits that governmental, church, and other tax-exempt organizations can provide to their employees. Given the short time between introduction and passage of the Act, it is not surprising that many of the new provisions are unclear in their application. Moreover, some of them may produce unintended consequences for these organizations.

As part of a symposium on “Recent Developments in Benefits/Executive Compensation Affecting Tax Exempt Organizations,” Carol V. Calhoun gave a presentation on the ways in which the Tax Cuts and Jobs Act of 2017 will affect the compensation and benefits of such organizations. A copy of the PowerPoint for her speech can be found at this link.

Nonprofits and Governments Face Compensation and Benefits Issues under the New Tax Law
(Posted on January 11, 2018 by Carol V. Calhoun)

The recently passed tax bill imposes a 21% excise tax on excess compensation and excess severance benefits of certain executives of nonprofit and governmental employers. The provision has a substantial impact on the compensation and benefits that such organizations can provide for their executives. Moreover, the determination of which employers, and which executives, are covered includes several traps for the unwary.